Prioritization of Trade Order Processing in Electronic Trading

ABSTRACT

Various systems and methods for trade order processing in an electronic trading environment are provided. According to one or more embodiments, two or more trade orders are currently queued for execution at one or more electronic exchanges and are to be modified at substantially the same time. Each trade order is processed according to a priority based on each order&#39;s proximity to a particular market price, for example.

BACKGROUND

The present invention is directed towards electronic trading. Moreparticularly, embodiments of the present invention are directed towardstrade order processing.

An electronic trading system provides for electronically matching ordersto buy and sell items to be traded. The items may include, for example,stocks, options, and commodities. Typically, an electronic exchange inthe electronic trading system is used to match the orders. In addition,the electronic exchange provides market data to various client devicesin the electronic trading system used by traders to place the orders.For example, the electronic exchange may provide market data such asprices for various items available for trading and trade confirmationsindicating what trades have occurred at what quantities and/or prices.An example of an electronic exchange is the CME® Globex® electronictrading platform, which is offered by the Chicago Mercantile Exchange(CME).

Oftentimes, multiple trade orders may be queued for execution at anelectronic exchange. These trade orders might require modification ofsome sort, even at substantially the same time. It is important then toprovide tools that are related to processing the modification of orders.

BRIEF DESCRIPTION OF THE DRAWINGS

Example embodiments are described herein with reference to the followingdrawings.

FIG. 1 illustrates an example electronic trading system in which certainembodiments may be employed.

FIG. 2 illustrates a flowchart of a process for determining priority ofprocessing two or more trade orders according to certain embodiments.

FIG. 3 illustrates a system for use in electronic trading using atechnique according to certain embodiments.

The following will be better understood by a person skilled in the artwhen read in conjunction with the drawings which show variousembodiments. The drawings are for the purpose of illustrating certainembodiments, but it is understood that the present invention is notlimited to the arrangements and instrumentality shown in the drawings.

DETAILED DESCRIPTION

Various systems and methods are described herein for use in prioritizingthe processing of modifications on trade orders that are currentlypending at an electronic exchange. As an example, a purpose of a tradeorder modification may include changing an order price, changing anorder quantity, or changing both the order price and order quantity,more of which is described below. The systems and methods areparticularly useful by a client device, a gateway device, a server-sidedevice, or some other intermediary device that is in communication withan electronic exchange, to determine which trade order modification toprocess first when two or more modifications are triggered atsubstantially the same time. The modification logic is executed for eachtrade order based on the priority.

In certain embodiments, the prioritization is based on computing a levelof risk that a given trade order will get executed unmodified (e.g.,before the desired modification has been implemented at the exchange),and comparing the level of risk across all pending orders that call fora modification. A modification of the trade order that has the highestrisk of getting executed unmodified will get processed by the devicefirst, until all of the trade order modifications have been processed.

In certain embodiments, the prioritization is based on the proximity ofan order price of each trade order to be modified to a correspondingmarket price. The corresponding market price may be based on a best bidprice, a best ask price, a last traded price, a theoretical price, or acombination of prices for a tradeable object. The corresponding marketprice for each trade order to be modified may be based on the same priceindicator, or it may be based on a different price indicator. Themodification of the trade order with an order price that is closest inproximity to its corresponding market price is processed first, forexample. Additionally, prioritization can be based on other factors,more of which are described below.

In certain embodiments, the prioritization is based on the likelihoodthat a trade order, once modified, will be executed by the electronicexchange. The trade order with the highest chance of being executed,taking into account the current state of the market and the desiredmodification, will get processed by the device first, until all of thetrade order modifications have been processed. Accordingly, the deviceattempts to modify a trade order first based on the increased chancethat the order, once modified, will get executed when compared to othertrade orders.

FIG. 1 illustrates an example electronic trading system 100 in whichcertain embodiments may be employed. The system 100 includes clientdevice 102, gateway device 104, server side automation device (“SSA”)106, and electronic exchange 108. According to this example, clientdevice 102 is in communication with gateway 104. Gateway 104 is incommunication with electronic exchange 108. SSA 106 may be incommunication with client device 102 and gateway 104.

According to some operations, client device 102 may be utilized to sendorders to buy or sell tradeable objects (e.g., trade orders) listed atexchange 108. Orders to be placed at exchange 108 via client device 102are sent through gateway 104. In addition, market data may be sent fromexchange 108 through gateway 104 to client device 102. The user mayutilize client device 102 to monitor the market data and may basedecisions to send an order for a tradeable object on the market data.Trading decisions at client device 102 may be manual or automated.

According to some operations, SSA 106 may be utilized to send orders tobuy or sell tradeable objects at exchange 108 on behalf of the user ofclient device 102. Orders to be placed at exchange 108 via SSA 106 aresent through gateway 104. Market data may be sent from exchange 108through gateway 104 to SSA 106. SSA 106 may monitor the market data andmay base decisions to send an order for a tradeable object on the marketdata. Trading decisions at SSA 106 are generally automated, but it maybe possible for a user of client device 102 to intervene manually, ifSSA 106 is so programmed.

Client device 102 may include one or more electronic computing devicessuch as a hand-held device, laptop, personal computer, workstation witha single or multi-core processor, server with multiple processors,and/or cluster of computers, for example. A present day commercialexample might include a computing device that utilizes the Windows XP®Professional operating system and has at least 2 GB of memory, twodual-core or two quad-core processors, a network card, and at least 10GB of hard drive space to accommodate software.

Client device 102 may also be configured to run one or more tradingapplications. The trading application(s) may, for example, processmarket data by arranging and displaying the market data in trading andcharting windows. This data processing may be based on user preferences,for example. In addition to manual style trading tools, the tradingapplication(s) may include an automated trading tool such as anautomated spread trading tool, for example. In another example, clientdevice 102 may be a computing system running a copy of X_TRADER™, anelectronic trading platform provided by Trading TechnologiesInternational, Inc. of Chicago, Ill. Regardless of the type of tradingapplication, client device 102 may be configured to send orders to buyand sell tradeable objects listed at exchange 108. Client device 102 mayalso be configured to cancel orders, change orders, and/or queryexchange 108, for example. Client device 102, including the one or moretrading applications, may also be configured to operate with one or moretrading applications at SSA 106, more of which are described below.

Orders sent by client device 102 may be sent at the request of a user,manually or automatically, for example. For example, a trader mayutilize an electronic trading workstation to place an order for aparticular tradeable object, manually providing various parameters forthe order such as an order price and/or quantity. In another example, anautomated trading tool may calculate one or more parameters for an orderand automatically send the order.

In certain embodiments, client device 102 includes a user interface. Theuser interface may include one or more display devices for presenting atext-based or graphical interface to a user, for example. For example,the display devices may include computer monitors, hand-held devicedisplays, projectors, and/or televisions. The user interface may be usedby the user to specify or review parameters for an order. The userinterface may include one or more input devices for receiving input froma user, for example. For example, the input devices may include akeyboard, trackball, two or three-button mouse, and/or touch screen. Theuser interface may include other devices for interacting with a user.For example, information may be aurally provided to a user through aspeaker and/or received through a microphone.

In certain embodiments, orders from client device 102 are sent on toexchange 108 through gateway 104. Client device 102 may communicate withgateway 104 using a local area network, a wide area network, a virtualprivate network, a T1 line, a T3 line, a point-of-presence, and/or theInternet, for example.

Server side automation (“SSA”) 106 may include one or more electroniccomputing platforms such as a personal computer, workstation with asingle or multi-core processor, server with multiple processors, and/orcluster of computers, for example. A present day commercial examplemight include a computing device that utilizes the Windows 2003 Server®(Server Pack 2) operating system and has at least 4 GB of memory, twodual-core or two quad-core processors, one or more network cards, and atleast 30 GB of hard drive space to accommodate software.

In certain embodiments, SSA 106 is used to implement automated orsemi-automated trading programs (collectively referred to herein asautomated trading programs). Orders may be sent directly from SSA 106 toexchange 108 through gateway 104. Orders may also be sent from anothercomputing device to exchange 108 via instructions from SSA, for example.In certain embodiments, SSA 106 is configured to implement an automatedtrading program on behalf of a user of client device 102. An exampletrading application that may run on SSA 106 is an automated spreadtrading tool like that disclosed in U.S. Pat. No. 7,437,325, thecontents of which are incorporated herein by reference. The commercialembodiment of an automated spread trading tool is Autospreader®, whichis offered by Trading Technologies International. The Autospreader® canbe configured to operate at client device 102, SSA 106, or both clientdevice 102 and SSA 106, for example.

In certain embodiments, SSA 106 is physically located at the same siteas client device 102. In certain embodiments, SSA 106 is physicallylocated at the same site as exchange 108. In certain embodiments, SSA106 is collocated with gateway 104. In certain embodiments, SSA 106 isphysically located at a site separate from both the client device 102and the exchange 108. In certain embodiments, regardless of the locationof SSA 106, client device 102 and SSA 106 may together be consideredpart of the “client side” of system 100, because SSA 106 may beoperating on behalf of a user at client device 102, for example.

Gateway 104 may include one or more electronic computing platforms suchas a personal computer, workstation with a single or multi-coreprocessor, server with multiple processors, and/or cluster of computers,for example. In certain embodiments, gateway 104 is physically locatedat the same site as the client device 102. In certain embodiments,gateway 104 is physically located at the same site as exchange 108. Incertain embodiments, gateway 104 is collocated with SSA 106. In certainembodiments, gateway 104 is physically located at a site separate fromboth the client device 102 and the exchange 108.

In certain embodiments, gateway 104 communicates with client device 102and/or SSA 106 using a local area network, a wide area network, avirtual private network, a T1 line, a T3 line, a point-of-presence,and/or the Internet, for example.

Gateway 104 is adapted to communicate with client device 102 andexchange 108. Gateway 104 facilitates communication between clientdevice 102 and/or SSA 106 and exchange 108. For example, gateway 104 mayreceive orders from client device 102 and/or SSA 106 and transmit theorders to exchange 108. As another example, gateway 104 may receivemarket data from exchange 108 and transmit the market data to clientdevice 102 and/or SSA 106. Gateway 104 may be used to implement certainembodiments of the present invention.

In certain embodiments, gateway 104 performs processing on datacommunicated between client device 102 and/or SSA 106 and exchange 108.For example, gateway 104 may process an order received from clientdevice 102 and/or SSA 106 into a data format acceptable by exchange 108.Similarly, gateway 104 may transform market data in an exchange-specificformat received from exchange 108 into a format understood by clientdevice 102 and/or SSA 106. The processing of gateway 104 may alsoinclude tracking orders from client device 102 and/or SSA 106 andupdating the status of the order based on fill confirmations receivedfrom exchange 108, for example. As another example, gateway 104 maycoalesce market data from exchange 108 and provide it to client device102 and/or SSA 106.

Electronic exchange 108 is configured to match orders to buy and selltradeable objects. The tradeable objects may be listed for trading atexchange 108. The orders may include orders received from the clientdevice 102, SSA 106, or both, for example. Orders may be received fromclient device 102, SSA 106, or both through gateway 104, for example. Inaddition, the orders may be received from other devices in communicationwith exchange 108. That is, typically exchange 108 will be incommunication with a variety of other client devices (which may besimilar to client device 102) or other computing devices that alsoprovide orders to be matched. As previously discussed, an example ofelectronic exchange 108 is the electronic trading platform offered bythe CME®, which is presently headquartered in Chicago, Ill.

Exchange 108 is configured to provide market data. The market data maybe provided to the client device 102, for example. The market data maybe provided to client device 102, SSA 106, or both through gateway 104,for example. The market data may include data that represents the insidemarket, for example. The inside market is the lowest sell price (alsoreferred to as the “best ask”) and the highest buy price (also referredto as the “best bid”) at a particular point in time. The market data mayalso include market depth. Market depth refers to the quantities (e.g.,bids and offers) available at other prices away from the inside market.In certain embodiments, market depth is provided for all price levels.In certain embodiments, market depth is provided for less than all pricelevels. For example, market depth may be provided only for the firstfive price levels on either side of the inside market. The market datamay also include information such as the last traded price (LTP), thelast traded quantity (LTQ), and order fill information.

In certain embodiments, system 100 includes more than one client device102. For example, multiple client devices similar to the client device102, discussed above, may be in communication with gateway 104 and/orSSA 106 to send orders to the exchange 108. Similarly, in certainembodiments, system 100 includes more than one SSA 106.

In certain embodiments, system 100 includes more than one gateway 104.For example, multiple gateways similar to the gateway 104, discussedabove, may be in communication with the client device 102 and/or SSA 106and the exchange 104. Such an arrangement may be used to provideredundancy should gateway 104 fail, for example. System 100 might alsoinclude additional gateways to facilitate communication between clientdevice 102 and/or SSA 106 and other exchanges besides exchange 108.

In certain embodiments, system 100 includes more than one exchange 108.For example, the gateway 104 may be in communication with multipleexchanges similar to the exchange 108, discussed above. Such anarrangement may allow client device 102 and/or SSA 106 to trade at morethan one exchange through gateway 104, for example.

In certain embodiments, gateway 104 is part of client device 102 and/orSSA 106. For example, the hardware/software components of gateway 104may be part of the same computing platform as the client device 102and/or SSA 106. As another example, the functionality of gateway 104 maybe performed by components of the client device 102 and/or SSA 106. Incertain embodiments, gateway 104 is not present. Such an arrangement mayoccur when the client device 102 and/or SSA 106 does not need to utilizegateway 104 to communicate with exchange 108—for example, if clientdevice 102 and/or SSA 106 have been adapted to communicate directly withexchange 108.

In certain embodiments, system 100 may include other devices that arespecific to the communications architecture such as middleware,firewalls, hubs, switches, routers, exchange-specific communicationequipment, modems, security managers, and/or encryption/decryptiondevices.

FIG. 2 illustrates a flowchart 200 of a process for use in prioritizingthe processing of modifications on trade orders that are currentlypending at an electronic exchange. As a preliminary matter, theflowchart 200 refers to a first trade order and a second trade order. Asdiscussed above, a trade order refers to an order to buy or sell aquantity (“order quantity”) of a particular tradeable object at a price(“order price”). It is to be understood that the first and second tradeorders may be orders to buy/sell the same tradeable object, oralternatively, they may be orders to buy/sell different tradeableobjects. Flowchart 200 similarly applies to situations when more thantwo orders are to be modified.

At block 202, first and second trade orders, which are currently queuedfor execution at an electronic exchange, are to be modified. Forpurposes of explanation, assume that the first trade order is residingin an order queue at a “first” electronic exchange and the second tradeorder is residing in an order queue at a “second” electronic exchange.It is to be understood that the two trade orders may be residing at thesame electronic exchange (i.e., the first exchange may be the sameexchange as the second exchange), or alternatively, the first tradeorder may be residing at a different exchange than the second tradeorder (i.e., first exchange may not be the same exchange as the secondexchange).

A trade order may be modified for any number of reasons, but an exampleincludes when a trading strategy calls for modifying a particular tradeorder in keeping with the definition and/or implementation of thetrading strategy. Sometimes a modification is necessary when certainmarket conditions, such as those on which the trade order is based,change, for example. Thus, receipt of a market update from an electronicexchange or some other data may trigger a need for a modification on atrade order. Examples of a modification include re-pricing an order(e.g., changing the price of an existing order, or canceling the orderand replacing it with an order at a new price), changing the orderquantity, canceling the order altogether (not re-pricing it), changingan order type, changing an execution condition, changing an order link,or modifying any parameter related to the trade order. According to aspecific example, an automated spread trading tool (e.g., implemented atSSA 106) might detect a market update for a tradeable object from anelectronic exchange and consequently be required to re-price two or moretrade orders as a result of the market update.

In addition, the systems and methods may be used all the time orpart-time for use in prioritizing the processing of modifications.However, they are particularly useful when the modifications of thefirst and second trade orders are triggered at substantially the sametime. For example, the modifications might be triggered at a time when aprocessor must make a decision to process one or the other trade ordermodification. The two or more trade orders could be from a single person(e.g., a trader) or from a group of people (e.g., a trading firm, bank,or some other trading entity).

At block 204, corresponding market prices for each trade order areidentified. For example, if the first trade order is a bid, then itscorresponding market price may be the lowest ask price for the tradeableobject in which the first trade order is bidding. If the first tradeorder is an ask, then its corresponding market price may be the highestbid price for the tradeable object in which the first trade order isoffering. In other words, in these two examples, the correspondingmarket prices are based on the opposite side of the market than thetrade order. Additionally, the corresponding market price may include alast trade price or a theoretical price (e.g., a formula driven valuelike a moving average), or the market price may be based on acombination of two or more prices. In some embodiments, a correspondingmarket price might also be referred to as a market price indicator (or“indicator”), because a best bid, best ask, last trade price, ortheoretical price may be considered an indicator whose underlying valuechanges in time (the underlying values are dynamic). Because the marketprices may be different for each trade order (or even the same), thesystem may be configured to identify the “corresponding” market pricefor each trade order.

At block 206, a determination is made with respect to which of the tradeorders is in closer proximity to its corresponding market price. Thisdetermination preferably optimizes the processing of trade orders byprocessing a modification for the trade order that exhibits a higherlevel of risk of getting executed unmodified (e.g., before the desiredmodification has been implemented at the exchange or before the desiredmodification has been communicated to the exchange) relative to the riskof having other trade order(s) executed unmodified. For example, if thefirst trade order price is bid at “100” and the market price used forcomparison is “101,” then the first trade order price is “1” price levelaway from the market price. If the second trade order price is offer at“78” (notice that in this example the second trade order is for adifferent tradeable object than the first trade order) and the marketprice used for comparison is “75,” then the second trade order price is“3” price levels away from the market price. Based on this information,then it appears that the first trade order has a greater chance ofexecution, because its corresponding market price is within one pricelevel of the trade order price. Consequently, the system would process amodification of the first trade order prior to processing a modificationof the second trade order.

Prioritization can be based on other factors (or a combination offactors) in addition to proximity, or in place of proximity. Forexample, the system may not be in a position to modify the first tradeorder at that moment in time (e.g., because there is already anin-flight message to modify the first trade order). Consequently, thesystem may be configured to process a modification of the second tradeorder in this instance. Additionally, the system may be configured tolook to the number of ticks (i.e., a tick represents the minimum upwardor downward movement in the price of a tradeable object). For example, atradeable object might tick in “0.25” increments versus “1.” Using theexample above, if the tradeable object of the first trade order ticks in“0.25” increments, but the tradeable object of the second trade orderticks in “1” increments, then the second trade order may appear to havea greater chance of execution (4 ticks for the first order versus 3ticks for the second trade order). According to yet another example, thesystem might take into account the volatility or market movement of thetradeable object(s). If the two or more trade orders are for differenttradeable objects, for example, and it is determined that the market forone tradeable object is moving slower than the market for the othertradeable object, then the system might view a trade order in the fastmoving market at more risk, even if it is priced further away from thecorresponding market price.

In other embodiments, the prioritization is based on the likelihood thata trade order, once modified, will be executed by the electronicexchange. The trade order with the highest chance of being executed,taking into account the current state of the market and the desiredmodification, will get processed by the system first, until all of thetrade order modifications have been processed. Accordingly, the systemattempts to modify a trade order first based on the increased chancethat the order, once modified, will get executed. For example, if thefirst trade order price is bid at “100” and the market price used forcomparison is “101,” then the first trade order price is “1” price levelaway from the market price. If the modification of the first trade orderinvolves changing the order price to “101,” then the first trade orderhas a high chance of getting executed after the modification,considering that the modified price is equal to the market price usedfor comparison (which could be the lowest ask price, for example). Thecomputed chance of execution may be determined for all of the tradeorders that call for a modification, taking into account each tradeorder's desired modification and the respective market conditions. Assuch, the priority may go to the trade order that has the highest chanceof getting executed when considering its desired modification.

In certain embodiments, if it is determined that at least two tradeorders have equal priority, as determined using one or more factorsdescribed above, for example, then the trade order which has apossibility of a larger impact to the trader based on a parameter otherthan price can be processed first. For example, the trade order with thelargest order quantity may be deemed to have a possibility of a largerimpact if it gets executed unmodified. As such, the system may processthe modification for the trade order with the largest order quantity,when two or more orders are considered to have equal priority using oneor more of the above factors. In another example, market volatilityand/or market movement may be used to determine which trade order toprocess first if at least two trade orders have equal priority.

In certain embodiments, if it is determined that at least two tradeorders have equal priority, then the trade order modifications may beprocessed in a random manner, or alternatively, the modifications may beprocessed according to a certain predefined order. An example ofrandomizing is that the system uses a randomizer (e.g., a randomgenerator) to determine which trade order modification is processedfirst. An example of modifying according to a predefined order is anembodiment that is based on first in, first out (FIFO), in which thesystem may be configured to process the oldest order first.

At block 208, it is determined to process the first trade ordermodification, whereas at block 210, it is determined to process thesecond trade order. A modification might include one or more steps thatare taken by one or more computing devices towards modifying the tradeorder at the exchange. A step might include calculating a new orderprice, or some other order parameter, like order quantity. Another stepmight include generating a request message to modify. Yet another stepmight include sending the actual request message on to the exchange.Processing a modification, which might include calculating a new price,generating the request message, and sending the request message to theelectronic exchange can take some processing time—for example, it couldtake as much as 100 microseconds in this example. Once the first tradeorder is processed (if it is determined to have priority), then thesystem can process the modification of the second trade order, orvice-versa.

In certain embodiments, this process can be repeated until all of thetrade order modifications have been processed. That is, if more than twotrade orders call for a modification, the system may repeat the process,e.g., starting at step 202 or 204, after the first trade ordermodification is processed to determine which trade order is to bemodified next. An advantage of determining priority in this manner isthat it takes into account the most recent market prices for each tradeorder (based on the assumption that the market prices may change whileprocessing trade order modifications). Additionally, it may take intoaccount any new modifications that were triggered while modificationsfor one or more of the trade orders were being processed. If only twotrade orders call for a modification, then the modification logic forthe highest priority trade order will occur first, which can then befollowed by the second trade order; in other words, the process ofdetermining priority in this instance would not have to be repeated foreach trade order.

Alternatively, the system may determine the priority for each tradeorder in a group of trade orders at according to flowchart 200, and thenexecute the modification logic correspondingly. That is, a priority maybe assigned to each trade order for a group of trade orders (e.g., viastep 206), and the modification logic can be executed for each tradeorder down the list of priority (e.g., from the highest priority to thelowest priority). The process may be repeated for any new modificationsafter the group trade order modifications are complete. As anotheroption, a priority may be individually assigned to any new modification,and then the system may adjust the list of priority accordingly toaccommodate the new modification(s) based on its priority assignment.

FIG. 3 illustrates a system 300 for using a technique according to anembodiment. The system 300 includes a market data processing component302, a prioritization processing component 304, and a modificationprocessing component 306. The components 302, 304, and 306 may beimplemented by one or more computing devices. For example, components302, 304, and 306 might be part of SSA 106 in FIG. 1, client device 102,a combination of SSA 106 and client device 102, electronic exchange 108,or a part of some other computing device or combination of computingdevices.

In operation, modification processing component 306 is configured toidentify at a substantially equal time that at least a first trade orderand a second trade order are to be modified. The first and second tradeorders are currently queued for execution at an electronic exchange. Themarket data processing component 302 is configured to retrieve thecorresponding market prices for each trade order. System 300 may beconfigured, for example, so that a corresponding market price is a bestbid price if the trade order is an order to sell, a best ask price ifthe trade order is an order to buy, a last trade price, or isrepresented by some other designated price or indicator. Prioritizationprocessing component 304 is configured to determine which trade ordermodification to process first given that the modifications are triggeredat substantially the same time. In certain embodiments, priority may begiven to the trade order that is closest in proximity to thecorresponding market price, for example, thereby indicating a higherlevel of chance of getting executed before the other trade order.Additionally, as discussed above, prioritization processing component304 might base the priority on a combination of factors or on otherfactors (e.g., in-flight transactions, and so on). Modificationprocessing component 306 is configured to process the modification ofthe trade order that has priority.

A Spread Trading Example According to Certain Embodiments

Assume the following scenario:

-   -   Creation of a two-legged synthetic spread AB, which comprises        buying contract A (e.g., buying leg A) and selling contract B        (e.g., selling leg B).    -   The spread is configured to quote leg A based on market        conditions in leg B.    -   The current inside markets for both contracts are as follows:        -   Contract A: Bid at 98, Ask at 100        -   Contract B: Bid at 96, Ask at 98

A desire to buy the AB spread at 1 is set. In response, an automatedtrading engine submits a buy order for contract A at 97. That price iscalculated as a sum of the currently existing bid price for contract B(e.g., 96) and the desired spread AB price (e.g., 1), which is Bid B+BidAB=96+1=97. Sometime later, a desire to buy the AB spread at 3 is alsoset. In response, the automated trading engine submits a buy order forcontract A at 99 (e.g., Bid B+Bid AB=96+3=99). As such, there are twotrade orders that are queued for execution in contract A

-   -   A first trade order to buy contract A at 97.    -   A second trade order to buy contract A at 99.

Now, assume that the bid price for contract B moves down to 95.Responsive to the change in bid price in contract B, the automatedtrading engine ideally would like to re-quote the first trade order to96 (e.g., 95+1) and the second trade order to 98 (e.g., 95+3) tomaintain the desired spread prices (e.g., 1 and 3). Each re-quote isreferred to as a modification.

Conventionally, each of the trade orders is processed according to thetime when they were originally placed, i.e., the oldest queued orderfirst. Using convention, the first trade order would be processed firstin this example. However, the system prioritizes the processing of thetwo orders based on their proximity to the other side of the market, forinstance. In this example, the second trade order is closer to the otherside of the market than the first trade order. That is, the first tradeorder is 3 price levels away from the Ask of 100 (e.g., compare 97 to100) versus the second trade order is 1 price level away from the Ask of100 (e.g., compare 99 to 100). Consequently, the system would processthe second trade order first, and then proceed to process the firsttrade order. Likely, the system would then send a message to theexchange to re-price the second trade order to 98 and then re-price thefirst trade order to 96.

In the example above, the two trade orders were compared to the sameindicator (e.g., the ask price), because they were both trade orders tobuy the same tradeable object. However, as discussed above, the twotrade orders could be different in that one trade order could be anoffer, whereas the other trade order could be a bid. Also, the tradeorders could be for different tradeable objects at the same or differentexchange(s). The trade orders could also originate from the same ordifferent trading strategies.

Irrespective of these specific examples, if the system (e.g., SSA 106,client device 102, or a combination of SSA 106 and client device 102 inFIG. 1) needs to modify two or more orders at substantially the sametime, the system can prioritize which order is processed first based oneach order's proximity to a particular market price. As a result, thesystem may reduce the chances of getting legged and/or missing anopportunity in the market. For instance, contrary to the example above,if the first trade order is re-priced prior to the second trade order,then it may be more likely that the second trade order is executedduring the time it takes to process the first trade order (given thatthe second trade order is closer in proximity to the ask price).Consequently, there is a greater chance that the spread strategy for thesecond trade order would get legged, or an unintended spread price wouldresult due to changing market conditions.

As used herein, a “tradeable object” refers to anything that can betraded with a price, a quantity, or both price and quantity. Forexample, financial products such as stocks, options, bonds, futures,currency, warrants, funds derivatives, commodities, and collections orcombinations of these may be tradeable objects. A tradeable object maybe “real” or “synthetic.” A real tradeable object includes products thatare listed by an exchange. A synthetic tradeable object includesproducts that are defined by the user and are not listed by an exchange.For example, a synthetic tradeable object may include a combination ofreal (or other synthetic) products such as a synthetic spread. Atradeable object may also include traded events or goods, for example.

One or more of the blocks of the flowchart discussed above may beimplemented alone or in combination in various forms in hardware,firmware, or as a set of instructions in software, for example. Certainembodiments may be provided as a set of instructions residing on acomputer-readable medium, such as a memory, hard disk, CD-ROM, DVD, orEPROM, for execution on a computer or other processing device.

Certain embodiments may omit one or more of these steps or perform thesteps in a different order than the order listed. For example, somesteps may not be performed in certain embodiments. As a further example,certain steps may be performed in a different temporal order, includingsimultaneously, than listed above.

Additionally, as described above, various computing devices may beconfigured to implement various aspects described herein. For example,the SSA 106 may be configured to implement the embodiments describedherein. Thus, for example, if a software trading application at SSA 106generated a number of trade orders at substantially the same time, thenthe embodiments described herein may be utilized to prioritize theprocessing of such orders. In another example, the client device 102 maybe configured to implement the embodiments described herein.Alternatively, a combination of the client device 102 and SSA 106 may beconfigured to jointly implement the embodiments described herein.

While the invention(s) has been described with reference to certainembodiments, it will be understood by those skilled in the art thatvarious changes may be made and equivalents may be substituted withoutdeparting from the scope of the invention. In addition, manymodifications may be made to adapt a particular situation or material tothe teachings of the invention without departing from its scope.Therefore, it is intended that the invention not be limited to theparticular embodiment disclosed, but that the invention will include allembodiments falling within the scope of the appended claims.

1 A method of trade order management that comprises the steps of:identifying, by a computing device, at a substantially equal time that afirst trade order and a second trade order are to be modified, whereinthe first trade order is currently queued for execution at a firstelectronic exchange, and the second trade order is currently queued forexecution at a second electronic exchange; responsive to the step ofidentifying, determining by the computing device to modify the firsttrade order prior to modifying the second trade order based on aproximity of an order price of each of the first and second trade ordersto a corresponding market price; and responsive to the step ofdetermining, processing by the computing device a modification of thefirst trade order prior to processing a modification of the second tradeorder.
 2. The method of claim 1, wherein the first and second electronicexchanges are the same electronic exchanges.
 3. The method of claim 1,wherein each of the first and second trade orders represents an order tobuy or sell a first tradeable object.
 4. The method of claim 1, whereinthe modification of at least one of the first and second trade orderscomprises modifying an order parameter.
 5. The method of claim 4,wherein the order parameter is any of the following: an order quantityand an order price.
 6. The method of claim 1, wherein the modificationof at least one of the first and second trade orders comprises cancelingthe at least one trade order.
 7. The method of claim 1, wherein thecorresponding market price represents a same price indicator for boththe first trade order and the second trade order.
 8. The method of claim1, wherein the corresponding market price represents a different priceindicator for each of the first and second trade orders.
 9. The methodof claim 1, wherein the corresponding market price for at least one ofthe first and second trade orders is based on any of the following priceindicators: a best bid price, a best ask price, a last traded price, anda theoretical price.
 10. The method of claim 1, wherein a price of thefirst trade order is closer in value to a corresponding market pricethan a price of the second trade order.
 11. The method of claim 1,wherein a price of the first trade order is closer in a number of ticklevels to the corresponding market price than a price of the secondtrade order.
 12. The method of claim 1, wherein the step of processingfurther comprises: sending a first request to the first electronicexchange to modify the first trade order, and subsequently sending asecond request to the second electronic exchange to modify the secondtrade order.
 13. A method of trade order management that comprises thesteps of: identifying, by a computing device, at a substantially equaltime that a first trade order and a second trade order are to bemodified, wherein the first trade order is currently queued forexecution at a first electronic exchange, and the second trade order iscurrently queued for execution at a second electronic exchange;responsive to the step of identifying, determining by the computingdevice to modify the first trade order prior to modifying the secondtrade order based on a level of risk that the first trade order will getexecuted at the first electronic exchange unmodified; and responsive tothe step of determining, processing by the computing device amodification of the first trade order prior to processing a modificationof the second trade order.
 14. The method of claim 13, wherein the firstand second electronic exchanges are the same electronic exchanges. 15.The method of claim 13, wherein each of the first and second tradeorders represents an order to buy or sell a first tradeable object. 16.The method of claim 13, wherein the modification of at least one of thefirst and second trade orders comprises modifying an order parameter.17. The method of claim 16, wherein the order parameter is any of thefollowing: an order quantity and an order price.
 18. The method of claim13, wherein the modification of at least one of the first and secondtrade orders comprises canceling the at least one trade order.
 19. Themethod of claim 13, further comprising: computing the level of riskbased on a proximity of an order price of each of the first and secondtrade orders to a corresponding market price.
 20. The method of claim13, wherein the step of processing further comprises: sending a firstrequest to the first electronic exchange to modify the first tradeorder, and subsequently sending a second request to the secondelectronic exchange to modify the second trade order.